Microinvesting is a new buzzword. It’s a pretty great tool that has some real limitations.
What is microinvesting?
Microinvesting is a strategy used in many apps like Acorns, Stash, or Robinhood that allow you to connect a debit card, round up your everyday purchases and invest the difference.
So if you spend $3.51, the app takes $0.49 cents and invests it. Each platform has its own mix of investment portfolios and will even let you choose between safe and riskier portfolios.
They also let you start investing with small amounts, like $5. Some have the option of adding capital independent of the rounded debit card purchases.
Strengths and Limitations
This is a strategy for using your spare change as a side hustle. That’s fantastic. This is not a significant investing strategy unless. . . .
You hold the account for a long time (slow and steady wins the race after all)
You add more than just your spare change at regular intervals.
If you are someone with no savings or little capital, these are good options to get you on the scoreboard so to speak, but don’t think these will produce a significant return any time soon.